Steps to creating Wireless LAN.
Choose a Flavor of Wi-Fi
Your choice is 802.11b/g (2.4GHz), 802.11a (5GHz), or dual-band that includes both 802.11b/g and 802.11a.
For most applications, 802.11b/g will suffice. You'll have up to 54Mbps data rates with fairly good capacity. The slower (11Mbps) 802.11b is interoperable with nearly all wireless LAN enabled devices, and probably considerably cheaper -- if you can even find them anymore.
Purchase a Wi-Fi Router
Something to keep in mind is that you need a Wi-Fi router, not an access point. Unlike an access point, a router supplies the necessary network layer functions, such as network address translation (NAT) and dynamic host configuration protocol (DHCP). This enables multiple devices on the network, such as PCs, laptops, PDAs, and printers, to share the single official IP address that a broadband ISP supplies. If you connect an access point directly to the broadband modem, usually only one device on your network will receive an IP address -- the access point itself.
Centralize the Router Installation
Install the router within reach of the broadband modem, using Ethernet patch cable. If you haven't already had a broadband connection established, consider having it installed somewhere central to the areas where you'll be using the wireless network. This is typically the center of the home.
Ideally, install the broadband connection in the same room as any device (such as a printer) that you want to connect to one of the Ethernet ports provided by the router. With two floors, choose installation on the floor where you'll be using the network a higher percentage of the time.
Default Settings Gets Things Going
Default configuration settings on the router will enable users to immediately associate and begin accessing broadband Internet services. Most routers have DHCP already enabled for obtaining the official IP address from the ISP through the broadband modem, and DHCP and NAT are ready on the router to hand out private IP addresses to user devices.
This truly makes the router installation straightforward. Normally, all you have to do is plug in the router and users will readily associate and have access to Internet applications. Be sure, however, to follow vendor-specific installation instructions.
Configure Security Mechanisms
By default, most routers don't have any security enabled, which means that all data packets are sent unencrypted in the clear. A unscrupulous person sitting in a car outside your home, for example, can wirelessly monitor these transmissions and see e-mail contents, user names, and passwords. In addition, unauthorized users can access files on computers inside the home and use the Internet through your broadband ISP connection.
If you don't want this to happen, then activate encryption supplied within your router. Wired equivalent privacy (WEP) is better than nothing, but take advantage of the more advanced Wi-Fi protected access (WPA) if it is available.
plus some more links below giving you more info on setting up wireless network.